10-QPeriod: Q3 FY2022

US BANCORP \DE\ Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 1, 2022For Securities:USBUSB-PHUSB-PPUSB-PRUSB-PQUSB-PSUSB-PA

Summary

U.S. Bancorp (USB) reported a decrease in net income for the third quarter of 2022 compared to the same period in 2021, with net income attributable to U.S. Bancorp of $1.8 billion, or $1.16 per diluted share, down from $2.0 billion, or $1.30 per diluted share, in Q3 2021. This decline was impacted by merger and integration-related charges for the planned acquisition of MUFG Union Bank, which reduced earnings per share by $0.02. The company saw a significant increase in net interest income, up 20.7%, driven by rising interest rates and strong loan growth, but this was partially offset by a decrease in noninterest income, particularly mortgage banking revenue, due to lower refinancing activities. Operating expenses increased by 6.1% due to higher compensation, employee benefits, and merger-related charges. The provision for credit losses also rose substantially to $362 million, compared to a benefit of $163 million in the prior year, reflecting increased loan growth and economic uncertainty. Despite these headwinds, the company's capital ratios remained strong, exceeding regulatory well-capitalized requirements. The pending acquisition of MUFG Union Bank is on track to close by December 1, 2022, subject to customary conditions.

Financial Highlights

37 data points
Beta

Revenue

$6.33B

Net Income

$1.81B

28.6% Net Margin

EPS (Diluted)

$1.16

Total Assets

$600.97B

Cash & Equivalents

$41.65B

Free Cash Flow

$3.50B

Financial Statements
Beta
Revenue$6.33B
Interest Expense$901.00M
Net Income$1.81B
EPS (Basic)$1.16
EPS (Diluted)$1.16
Shares Outstanding (Basic)1.49B
Shares Outstanding (Diluted)1.49B

Key Highlights

  • 1Net income for Q3 2022 decreased by 10.7% year-over-year to $1.812 billion, with diluted EPS falling to $1.16 from $1.30.
  • 2Net interest income increased by 20.7% to $3.827 billion in Q3 2022, benefiting from higher interest rates and loan growth.
  • 3Noninterest income decreased by 8.3% to $2.469 billion, primarily due to a significant drop in mortgage banking revenue.
  • 4Noninterest expense rose by 6.1% to $3.637 billion, impacted by higher compensation, employee benefits, and $42 million in merger and integration charges.
  • 5The provision for credit losses was $362 million in Q3 2022, a significant increase from a benefit of $163 million in Q3 2021, reflecting economic uncertainty and loan growth.
  • 6Total assets grew by 4.8% to $600.97 billion at September 30, 2022, compared to December 31, 2021.
  • 7The acquisition of MUFG Union Bank's core regional banking franchise received regulatory approval and is expected to close on December 1, 2022.

Frequently Asked Questions

U.S. Bancorp's net income decreased by 10.7% year-over-year in the third quarter of 2022. This was primarily driven by a significant increase in the provision for credit losses to $362 million from a benefit of $163 million in the prior year, alongside higher noninterest expenses. While net interest income saw a strong increase of 20.7%, this was offset by a notable decline in noninterest income, particularly mortgage banking revenue.

The acquisition of MUFG Union Bank's core regional banking franchise has received all required regulatory approvals and is expected to close on December 1, 2022, subject to the satisfaction of customary closing conditions. The company incurred $42 million in merger and integration-related charges in the third quarter of 2022, which reduced diluted earnings per share by $0.02.

Net interest income increased by 20.7% in the third quarter of 2022, reaching $3.827 billion. This growth was primarily attributed to the impact of rising interest rates on earning assets and strong growth in average loan and investment securities balances. The company's net interest margin also improved to 2.83% on a taxable-equivalent basis, up from 2.53% in the prior year, indicating a positive benefit from the higher rate environment.

The loan portfolio grew by 9.8% to $342.7 billion at the end of September 2022, driven by increases in commercial loans, residential mortgages, and credit card loans. The provision for credit losses increased significantly, reflecting strong loan growth and increasing economic uncertainty. However, asset quality metrics remained relatively stable, with nonperforming assets decreasing by 22.9% and the allowance for credit losses as a percentage of period-end loans decreasing slightly to 1.88% from 1.97% at the end of 2021.